The Tokyo real estate market has undergone a tremendous change over the last 20 years having been home to some of the most expensive real estate in the world. However, things have changed dramatically for the Japanese economy and Tokyo in particular has taken a massive hit. The landscape is now unrecognisable from that just 20 years ago when the hustle and bustle of a growing economy brought investors and expats from every corner of the globe.
So, why has the Tokyo real estate market taken such a hit? What are the so-called “ghost homes” on the outskirts of Tokyo?
Yokosuka now a ghost town
As real estate prices across Tokyo increased to record levels just 20 years ago many investors began to look towards the outskirts of the city. Yokosuka became one of the focal points for investors looking for value real estate with the prosperous local car industry supporting the economy. In many ways it seemed like a “no-brainer” because as Tokyo real estate prices continued to increase so investors would begin to look further afield. This worked for a few years and then the mechanisation of the automobile industry hit home.
As employment became more difficult, property prices began to fall and many of the younger generation began to look elsewhere, Yokosuka began to struggle.
Recent figures confirm that 14% of homes across Yokosuka are now empty and a phenomenal 8 million properties across the whole of Japan lie dormant. It is common knowledge that the Japanese economy has struggled for a good 20 years now and the once buoyant stock market is but a shadow of its former self. Indeed if you ask the local estate agents many do not even bother listing properties for sale in the area because there is little or no chance of concluding a deal.
Those who do manage to sell their properties in Yokosuka are lucky to receive just a few thousand dollars and unless we see a dramatic turnaround this is likely to continue for some time to come.
We are starting to see the emergence of a new pattern across central Tokyo with Chinese middle class investors now looking to pick up good value property in the region. While the majority of Chinese investors in worldwide real estate markets are often in the “billionaire bracket” those looking towards Tokyo are hard-working middle classes.
One recent report suggested that apartment prices in some of the most sought-after areas of central Tokyo have increased by 20% over the last year. When you bear in mind this is the first meaningful increase in Tokyo property prices for the last 20 years this perfectly illustrates the challenging environment.
If we look back to the 1980s the Japanese stock market was one of the world leaders as was the economy which seemed well set for the future. A slowing economy and a damaging bout of deflation took the wind out of the country and many believe it is still suffering today. We may look back in 10 or 20 years and wonder why we never picked up central Tokyo apartment properties at “rock bottom prices” but nothing is certain in the world of international real estate. Who would have guessed Tokyo, the darling of the worldwide real estate market, would come crashing down so quickly?